The South Korean government crackdown on cryptocurrencies continues to intensify, causing many banks to stop issuing accounts that are required for crypto trading. The regulator has explicitly demanded that all banks that issue virtual bank accounts for the purpose of trading cryptos will have to verify the identity of any new account holder.
Since virtual bank accounts are a necessity in order to trade through a crypto exchange in South Korea, this new requirement will limit the number of people with access to a virtual bank account, as well as increase the amount of time needed to obtain an account.
While recent reports from Seoul have been more positive, suggesting that the country will not ban Bitcoin exchanges, and would regulate them instead, some banks are taking precautionary measures to assure their compliance with the Financial Services Commission and its demands. Officials have been racing to create and implement regulations that will inhibit banks from dealing with crypto trading.
The primary concerns involved are the use of Bitcoin and other cryptocurrencies as tools for money laundering and tax evasion. However, recent surges in demand for Bitcoin have led to deeper concerns regarding the high level of risk involved, and the potential devastation that could impact Koreans in the event of a sharp decline in Bitcoin valuation.
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The FSC has already placed a ban on ICOs within the country, and has cracked down on trading cryptocurrencies on credit.
Meanwhile, in an effort to contain the pace of growth of the industry within the country, regulations are being discussed that would prohibit foreigners and minors from being able to trade cryptocurrencies or even open bank accounts. All of these steps are being taken with the intent to limit the risks associated with the fast-expanding and relatively unknown field of crypto trading.
Some of the major banks that have already decided to stop issuing new virtual bank accounts include Korea Development Bank (KDB), Shinhan Bank, Industrial Bank of Korea (IBK), Woori Bank, KB Kookmin Bank, and KEB Hana Bank.
The decision made by these banks is compliant with the demands made by the regulator, that imposed an ICO ban earlier this year. However, as the demand for Bitcoin and alternative cryptocurrencies continues to rise, it appears that South Korean officials are considering removing the ban on ICOs for certain professionals, who have the necessary knowledge and expertise to conduct the process properly.